ISIS Focus No.3 Mar 2013

7/27/2019 ISIS Focus No.3 Mar 2013

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ISIS FOCUS

LimitedCirculation

INSTITUTEOFSTRATEGICANDINTERNATIONALSTUDIES(ISIS)MALAYSIA

www.isis.org.my

IssueNo.3 March2013 PP5054/11/2012(031098)

ISIS RoundtableProviding Public and AffordableHousing for Malaysia

A REPORT


2/20

Publishedby

InstituteofStrategicandInternationalStudies(ISIS)Malaysia

No.1,PersiaranSultanSalahuddin

P.O.Box12424,50778KualaLumpur,Malaysia

Tel: +60326939366

Fax: +60326915435

Email: [email protected]

Website:www.isis.org.my

The Institute of Strategic and International Studies (ISIS)

Malaysiawasestablishedon8April1983,inrealizationofa

decision madeby the Malaysian Government to setupan

autonomous, notforprofit research organization that

wouldact

as

the

nations

think

tank.

ISIS

Malaysia

was

envisioned to contribute towards sound public policy

formulationanddiscourse.

TheresearchmandateofISISthereforespansawidearea.It

includes economics, foreign policy and security studies,

socialpolicy,and technology, innovation,environmentand

sustainability.

ISIS Malaysia today fosters dialogue and promotes the

exchange of views and opinions at both national and

international levels. Itundertakes research incollaboration

withnational and international organizations, in important

areas such as national development and international

affairs.

ISISMalaysiaalsoengagesactively inTrackTwodiplomacy,

fostering highlevel dialogues at national, bilateral and

regional levels, through discussions with influential

policymakersandthoughtleaders.

RESEARCHEconomics

Research inthisarea isgenerallyaimedatpromotingrapid

andsustainedeconomicgrowthandequitabledevelopment

inthenation.Westudyspecific(ratherthangeneric) issues

that concern the nations competitiveness, productivity,

growth and income. Areas of research include

macroeconomicpolicy,

trade

and

investment,

banking

and

finance, industrial and infrastructure development and

human capital and labour market development. The

objectiveofallourresearchistodevelopactionablepolicies

andtospurinstitutionalchange.

ForeignPolicyandSecurityStudies

The primary aim of this programme is to provide relevant

policyanalysesonmatterspertainingtoMalaysiasstrategic

interestsaswellasregionaland international issues,witha

focus on the AsiaPacific Region. These include security

studies, foreignpolicy,SoutheastAsianpoliticsandmilitary

affairs.

Socialpolicy

Demographic and sociocultural trends are changing

Malaysian society and the social policy programme was

established to respond to these developments. Research in

this area is concerned with effective nation building, and

fostering greater national unity. In particular, we look at

issues involving the youth, women and underprivileged

communities. In conducting its research, ISIS Malaysia

networks with nongovernmental organizations and civil

societygroups.

Technology,Innovation,Environment&Sustainability(TIES)

The TIES programme provides strategic foresight,

collaborative researchandpolicyadvicetothepublicsector,

businesses and policy audiences, on technology, innovation,

environmentandsustainabledevelopment.Itsfocus includes

green growth as well as energy, water and food security.

Towards this end, TIES has been active in organizing

dialogues,forums,policybriefsandconsultancies.

HIGHLIGHTSISIS Malaysia has, among others, researched and provided

concretepolicyrecommendationsfor:

Greaterempowerment

and

revitalization

of

anational

investmentpromotionagency;

A strategic plan of action to capitalize on the rapid

growth and development of a vibrant Southeast Asian

emergingeconomy;

AMasterPlantomovetheMalaysianeconomytowards

knowledgebasedsourcesofoutputgrowth;

Theconceptualizationofanationalvisionstatement;

Effective management and rightsizing of the public

sector;and

Strengthening of ASEAN institutions and cooperation

processes.

ISISMalaysia

has

organized

the

highly

regarded

Asia

Pacific

Roundtable, an annual conference of highlevel security

policymakers,implementersandthinkers,since1986.

INTERNATIONALNETWORKING

AsamemberoftheTrackTwocommunity,ISISMalaysiaparticipatesinthefollowingnetworks: ASEANISISnetworkofpolicyresearchinstitutes; Council for Security and Cooperation in Asia and the

Pacific(CSCAP); NetworkofEastAsianThinkTanks(NEAT);and PacificEconomicCooperationCouncil(PECC).It is also a partner institute of the World EconomicForum(WEF).

EditorialTeamMahaniZainalAbidin

StevenWong

SusanTeoh

ThangamKRamnath

DesignRazakIsmail

JefriHambali

PhotographyJefriHambali/HalilMusa

ABOUTISISMALAYSIA


3/20

ISISFOCUS NO.3/2013 1

Session 1: Policies and Institutional

Framework

Inthe

first

Session

of

the

Roundtable,

Dr

Ruhizal

Roosli, Senior Lecturer at the School of Housing,

Building and Planning, Universiti Sains Malaysia,

gaveanoverviewofpublichousingpolicies,while

DatukMohamadYusoffGhazali,DeputyDirector

General (Development), National Housing

Department, Ministry of Housing and Local

Government, spoke on the institutional

frameworkforpublichousing.MrAndrewWong,

Chief Editorial Officer, Terra Value Sdn Bhd

moderatedthesession.

Dr Ruhizal Roosli argued that adequacy

and affordability issues remained, even as there

appeared to be ample housing to accommodate

every family. Limited coverage for vulnerable

householdsandwelfare losscausedbyabuses inhousing allocations were the two most severe

problems facing current public housing policies.

Subsidies should be allocated for lowincome

familiesandwelfarerecipients,whilekeepingthe

lesson behind the collapse of the US subprime

mortgagemarketinmind.

The raising of the maximum household

incometobeeligible foraffordablehousing from

RM3,000 to RM6,000 has meant that the more

ISIS RoundtableProviding Public and Affordable Housing for Malaysia :A ReportT

heRoundtablewasmadeupoffoursessionsthatdiscussedissuesrangingfrompoliciesandinstitutionalframeworkinprovidingpublicandaffordablehousingforthenation,tomeetingtheneedforaffordablehousingandthesuppliersperspective.Itwasheldon16

July 2012 at the Sheraton Imperial Kuala Lumpur. This reportwaswritten by ISIS researchersMazlenaMazlanandNorIzzatinaAziz,andISISinterns HwaEnNingandNaqiahAzhar.

(Fromleft)RuhizalRoosli,MahaniZainalAbidin,AndrewWongandMohamadYusoffGhazali


4/20

2 ISISFOCUS NO.3/2013

disadvantaged groups must now compete with

higher income earners. The right integration of

national policies, housing policies and housing

strategiesis

paramount

in

producing

asuccessful

housingpolicy.

Housing in Europe is more affordable

comparedtothat intheUK.Europeansalsohave

more freedom to choose between buying and

renting.ThehousingsystemintheUS,meanwhile,

is more marketdriven, locallycontrolled and

performancebased, with renters making up 34

percentof thepopulation. InSingapore, there is

concernaboutthesharpincreaseinmarketprices

of

property,

including

those

of

the

Housing

DevelopmentBoard.

InMalaysia,pricesinthepropertymarket

have been increasing. The government, in

implementing the rental approach to public

housing, faced a great challenge in the

lackadaisical attitude of households to paying

rent. As a result, there was a shift to enforcing

home ownership in the approach to lowcost

housing.

Datuk Mohamad Yusoff Ghazali

highlightedhousingasaresponsibilityofboththe

federal and the state governments, under the

federal constitution. Governments at federal,

stateand local levels,and theprivate sector,are

key players in the housing market. The

government has undertaken various housing

programmes and initiatives to assist lowincome

earners own houses. Examples are the Peoples

Housing Programme and Program PerumahanRakyatBersepadubytheMinistryofHousingand

LocalGovernment.

In addition, the National Housing Policy

stressedthegovernments focusontheprovision

ofaffordablehousing for lowandmiddleincome

groups.TheGovernmentMaintenanceFacilitation

Fund was established under the 10th Malaysia

Plan to assist in carrying out major repairs in

common areas of lowcost housing estates.

However,littleprogresshasbeenmadeinforming

a single, consolidated housing agency to replace

thecurrentmultiagencysystem.

DatukYusoff,quoting theDepartmentof

StatisticsHouseholdIncomeSurvey,statedthat76

per cent of Malaysians are earning below

RM5,000monthly.Basedonacreditlineof30per

centofnet income,andthecurrentbase lending

rate of 6.6 per cent, Datuk Yusoff derived

RM300,000 as the maximum price the middle

incomegroupcanaffordtopayforahousetoday,

assumingnootherfinancialobligations.

Violations

of

the

Housing

Act

have

becomeagraveconcernas reputabledevelopers

arenot reprimanded for sellingpropertywithout

legal entitlement. Purchasers meanwhile are

made bankrupt due to void contracts. While

errantdevelopersareblacklistedandtheirnames

putupon theMinistrys website for thepublics

knowledge,harsherpunishmentsarestillneeded.

The National Housing Department has

data on lowcost housing that can be made

...littleprogresshasbeenmade

informingasingle,consolidated

housingagencytoreplacethe

currentmultiagencysystem

ISISRoundtable

MohamadYusoffGhazali


5/20


available to thepublic.Everystatehasanational

registration system throughwhich thepublic can

apply for housing. However, publicized

informationon

low

cost

housing

and

application

processseemstobelacking.

DatukYusoffarguedthatemulatingother

countries affordable housing models was

challenging,givenMalaysias3tieredgovernment

administrationframeworkandstateownershipof

data. He proposed the enhancement of the

current EPF scheme and a consolidated single

entity to design, build and manage all federally

fundedhousing.Asthereareapplicantswhohave

been

turned

away

by

regular

banks

due

to

blacklisting or underqualification, Datuk Yusoff

proposed the creation of specialized banks to

provide loans for affordable housing, to

complement other financial institutions that are

alsolendingforthesamepurpose.

Takeawaysfromthesession:1. Whilethereappearstobeamplehousing

to accommodate every family, the high

prices

of

houses

have

resulted

in

persisting issues of adequacy and

affordability.

2. The twomost severeproblemsare those

posedby limited coverage for vulnerable

households and welfare loss caused by

abusesinhousingresourcesallocation.

3. The 3tiered government structure and

state ownership of data are challenges

against the important step of

consolidation and formation of a single

housingagency.

4. Private sector participation is still

important in meeting overall housing

demand,but theenforcementofhousing

policies and the need to reprimand

violators of the law are longstanding

issuesthatrequireseriousattention.

5. There needs to be more transparency in

the provision of information and the

publicneedstobemoreempowered.

ProvidingPublicandAffordableHousingforMalaysia

Session 2: Meeting the Needs of

AffordableHousing

Thesecond sessionwaschairedbyMsAuFoong

Yee of The Edge. The speakers were Dr ZailanMohd Isa, Director of the National Property

InformationCentre(NAPIC),MrChangKimLoong,

Secretary General of the National House Buyers

Association(HBA),andMrRajanParamesran,Vice

PresidentofRatingsatMARC.

Dr Zailan Mohd Isa, in her presentation

entitled `Historical Trends for the Housing

Market, provided participants with insights into

Malaysiashousingmarketperformance inrecent

years,and themarketoutlook for2012. In2011,

property transaction value to GDP reached 24.5

per cent, reflecting the highly active property

market over the past decade (see Table 1). The

high value was supported by an accommodative

bankingsector,withhousing loansaccountingfor

57 per cent of total loans given to the property

sector.

In the residential property subsector,

growth continued with increases in sales

performance, newlylaunched projects, reduced

property overhang and higher housing starts.

(Fromleft)AuFoongYeeandRajanParamesran


6/20


ISISRoundtable

Figure1:HousingTransactionbyPricerange,H12010H12012p

YearGross DomesticProduct (GDP)

(RM Billion)

GDP

(%)Growth

Property

Transaction

Value (RM

Billion)

% change

pa of

Transaction

Value

% of Property

Transaction

Value to the

GDP

PropertyTransaction

Volume

% change

pa of

Transaction

Volume

2000 356.40 8.3 39.20 14.0 11.0 239,981 6.2

2001 358.25 0.5 38.63 1.4 10.8 242,634 1.1

2002 377.56 5.4 38.64 0.0 10.2 231,394 4.6

2003 399.41 5.8 43.43 12.4 10.9 243,376 5.2

2004 426.51 6.8 60.01 38.2 14.1 293,318 20.5

2005 449.25 5.3 56.78 5.4 12.6 276,508 5.7

2006 475.19 5.8 61.60 8.5 13.0 283,897 2.7

2007 505.35 6.3 77.14 25.2 15.3 309,455 9.02008 530.68 4.6 88.34 14.5 16.7 340,240 9.9

2009 522.00 1.6 81.00 8.3 15.6 337,859 0.7

2010 559.55 7.2 107.44 32.6 19.2 376,583 11.5

2011p 558.30 5.1 137.83 27.8 24.5 430,403 14.2

p Preliminary

Source: Department of Statistics Malaysia and NAPIC, 20012012

Table1:GrossDomesticProduct(GDP),PropertyTransactionValueandVolumeinMalaysiain20002011p

p

p Preliminary


7/20


While more than 65 per cent of residential

property transactions involve properties that are

priced RM200,000 and below (see Figure 1),

recenttrends

have

shown

that

the

availability

of

affordable housing is a concern. In 2011, the

biggest contributor to housing supply based on

units launched was property costing between

RM500,001andRM750,000(SeeTable2).

The last three years sawadecline in the

number of unsold new houses. Conversely, the

value of unsold new houses has been rising,

reflectingthechangeindistributiontowardsmore

overhunghousesatthehigherendofthemarket.

However,in

Q1

of

2012,

houses

worth

less

than

RM200,000 recorded the highest amount of

overhang, and was dominated by houses

categorized as low cost (See Table 3).

Nonetheless, Dr Zailan argued that the high

overhangoflowcosthousinghasbeenlargelydue

to administrative delays rather than the inability

ofthemarkettoabsorbsupply.

Housing construction, building plan

approvalsandstartshave increased,raisingnear

term housing supply. Construction of new

residentialproperty

is

dominated

by

two

and

threestoried,terracedhouseswithhigh landuse,

and hence, higher prices. However, the trend of

projectcompletionhasbeenon thedeclinesince

2009.DrZailannoteda lackofaffordablehouses

in several major areas in Malaysia. She added

however that the measures introduced by Bank

Negaratotightenloanrequirementswouldreinin

speculationandstrengthenthepropertymarket.

Industry players constituted NAPICs

primarysource

of

data;

these

included

the

Real

Estate and Housing Developers Association

(REHDA) and its 39 branch offices nationwide.

Data timeliness therefore depended highly on

providerstimelysubmission.NAPICusedthesales

performance of newlylaunched projects and

transaction data as proxy to determine demand

for residential property in Malaysia, while

incomingandplannedsupplythroughapplications


Price Range Units Launched

RM 100,000 & Below 1,367

RM 100,001 200,000 1,387

RM 200,001 300,000 5,611

RM 300,001 400,000 7,864

RM 400,001 500,000 5,900

RM 500,001 750,000 17,422

RM 750,001 1,000,000 5,728

Above RM 1,000,000 4,011

Total 49,290

Table2:ResidentialUnitsLaunchedin2011


8/20


Table3:

TotalOverhangUnitsby

PriceRangeandHouseTypesinMalaysiaasatQ12012

PriceRange

a.

Terrace

b

.Semi

D

etached

c.

Detached

d.

Cluster

e.

Low

Cost

f.High

rise

Total

a.

RM200

,000orless

TotalUnitsLaunched

17

,356

1,4

91

189

910

15

,094

16

,491

51

,531

OverhangUnits

5,4

04

535

49

103

3,4

11

2,4

20

11

,922

Sum

ofValue

608

.0

80

.1

7.1

16

.5

196

.1

267

.0

1,1

74

.9

b.

RM200

,001

RM500

,000

TotalUnitsLaunched

5,8

51

1,9

65

592

657

40

7,6

45

16

,750

OverhangUnits

1,8

04

696

250

261

15

1,5

73

4,5

99

Sum

ofValue

502

.3

206

.6

79

.1

83

.5

3.9

541

.9

1,4

17

.4

c.

RM500

,001

RM1

,000

,000

TotalUnitsLaunched

502

226

164

10

0

1,5

89

2,4

91

OverhangUnits

125

81

63

6

0

239

514

Sum

ofValue

85

.7

55

.6

41

.4

3.9

0.0

151

.2

337

.7

d.M

orethanRM1

,000

,000

TotalUnitsLaunched

83

78

223

0

0

2,7

28

3,1

12

OverhangUnits

12

17

69

0

0

792

890

Sum

ofValue

20

.9

31

.6

167

.9

0.0

0.0

1,4

17

.6

1,6

38

.0

Tot

alUnitsLaunched

23,7

92

3,7

60

1,1

68

1,5

77

15,1

34

28,4

53

73,8

84

OverhangUnits

7,3

45

1,3

29

431

370

3,4

26

5,0

24

17,9

25

Sum

ofValue

('000,0

00)

1,2

17.0

373.9

295.4

103.9

200.0

2,3

77.8

4,5

68.0

ISISRoundtable


9/20

forbuildingpermitsmadeupsupplydata for the

mediumterm(i.e.lessthantwoyears).NAPICand

the Economic Planning Unit cooperated to

produceaprojection

of

housing

supply

for

the

MalaysiaPlan.

Mr Chang Kim Loong highlighted the

challengefacedbyhousebuyersingainingaccess

to affordable housing, particularly in Selangor.

Speculation was a major cause for the excessive

rise in house prices. He further argued that

currentpoliciesare insufficientaseasymortgages

byfinancialinstitutionsandlowrealpropertygain

tax (RPGT) have failed to prevent house prices

from

rising

out

of

the

reach

of

ordinary

Malaysians.

In addition, income growth has not kept

up with the increase in property prices. Even

houses locatedoutsidehotareasforexample

inareaslikeKajangarenolongeraffordableto

an average household. The Median of Property

Price widely used internationally was used on

selected areas in Selangor. By this measure,

houses are severely unaffordable to an average

householdin

Malaysias

richest

state.

Table

4

explainstheMedianPropertyPricemeasurement

whileTable5 showshowcurrentpropertyprices

havebecomeseverelyunaffordable.

Mr Chang stressed that the government

musttakepreventivemeasuresthatwilli)restrict

thespeculationthatcausesrapidriseofproperty

prices; ii) ensure a steady supply of affordable

homesforthelowerandmiddleincomesectorsof

thepopulation,andiii)preventaheavilyindebted

youngpopulation

that

will

create

social

problems.

The availability of effective public transportation

networks to the suburbs is also crucial as house

prices increase in the city centre. However,

developingapublic transportationnetwork takes

much longer than does the construction of

housingprojects.

Mr Rajan Paramesran spoke on the

financialsectorsrole inensuringtheaffordability

ofhomesthroughfinancing.Firstly,hearguedfor

the need to clearly define affordable price;

currently this ranges from RM25,000 to

RM350,000. Similarly, different ceilings of

affordability have been established, such as RM

220,000 and RM 400,000. Despite these

ambiguities, commercial banks have remained

highlyaccommodativeinlendingforthepurchase

of residential properties. Furthermore, low

interest rates have provided incentive to switch

fundsfromdepositstopropertypurchases.

The government has also played an

important role in promoting home ownership

among Malaysians through some of its policies,

especially in the last five years. Among policy

instrumentsusedarei)ensuringtheavailabilityof

lowcosthousing,ii)exemptionfromRPGT,iii)tax

exemptions as well as relief on stamp duty and

interestpaidonhousingloansand iv)allowingthe



ChangKimLoong

thegovernmentmusttake

preventivemeasuresthatwill

.restrictthespeculationthat

causestherapidriseof

propertyprices


10/20


Category

Property

Price

as

multiple

of

annual

household

income

(times)

Severelyunaffordable x>5.1

Seriouslyunaffordable 4.1 5.0

Moderatelyunaffordable 3.1 4.0

Affordable x


11/20

highlandpricesposea

challengetotheprivatesectorin

increasingthesupplyof

affordablehousing

ii) shortentheapprovaltimeforbuildingand

occupancypermits,and

iii) reducethepricesofinputmaterials

Lowcosthousingpoliciesneed revisiting.

Thequestiontoask iswhethermore lowcost

housing is needed in the market. The

determinationof demand and supply in low

costand lowmediumcosthousingshouldbe

evidencebased. InPenang, forexample, low

costhousesseem tobe inexcesssupply.The

resalevalueof lowcostandlowmediumcost

houses is suppressed; it is often lower than

the purchase price. Other lowcost housing

policiesthat

need

revisiting

are

those

on

the

seemingly nonessential regulations such as

therequirementtoprovidecarparksfor low

costhouses, the stategovernmentcontrolled

allocation process for lowcost houses which

has contributed to theirhighoverhang rates,

and the environment of a lowcost housing

estate.

Takeawaysfromthesession:1.

In

housing

supply

there

is

aconcentration

of houses at the upper end of the price

range while income growth has not kept

upwithpropertyprices.

2. Supplyof land is anextremely important

determinantofhousingsupplyandcost.

3. While policies in the financial sector

played an important role in supporting

home ownership, more accommodative

financialpolicieshavealsocontributed to

speculativedemand.

4.

Lowcost

housing

policies

need

revisiting.

Thehighrateofunsoldlowcosthousesis

causedby administrative inefficiency and

poor planning, rather than a lack of

demand.Itarguesforacareful,evidence

basedstudyonsupplyanddemand.

utilization of individual private pensions for

housing loan repayments, and v) mandated

lendingand interest rateceiling requirements for

commercialbanks.

Some

of

these

actions

fuelled

demand for residential property, as exhibited by

the jump in housing loan applications and

approvalssince2007(SeeFigure2).

Over the last two years, however, the

government began to realize the need to hold

back the surge in house prices as speculation

heightened;consumerindebtednesshadgrownat

an annual rate of 13.5 per cent over the period

20002009. Therefore, RPGT was reinstated and

itsrates

raised

while

the

margin

of

financing

for

thirdpurchaseonwardswastightenedtodampen

speculation. To reduce household indebtedness,

Bank Negara Malaysia required consumer loan

eligibility to be calculated based on net income.

MrRajan concurred thathousepriceshave risen

disproportionately relative to incomes. A loan

quantum is thereforeneeded, toensure that the

installment obligation is not onerous for

households.

Landprice

is

an

important

factor

as

high

landpricesposeachallengetotheprivatesector

in increasing the supply of affordable housing.

Severalviewswereexpressed.Whileaparticipant

proposed, on the one hand, that the authorities

provide land for affordable houses at nominal

cost,andatthesametimestoplandprivatization

for uses other than affordable housing, on the

other hand, the private sector would prefer the

governmenttodothefollowing:

i)

increasethe

supply

of

land,




12/20

Session 3: Housing a Nation: The

SuppliersPerspective

At session 3, the speakers wereDatukHjMohd

AminNordinAbdAziz,DeputyDirectorGeneralof

Socioeconomic Development, Kuala Lumpur City

Hall (DBKL), Dato Fateh Iskandar Tan Sri Dato

MohamedMansor, Managing Director and Chief

Executive Officer of Glomac Berhad and Deputy

President of the Real Estate and Housing

Developers Association (REHDA), Dato Dr

Kamarul Rashdan Salleh, Managing Director,

Syarikat Perumahan Negara Berhad (SPNB) and

Dato

Mutalib

Alias,

Chief

Executive

Officer,

PR1MA. Mr Steven Wong, Senior Director, ISIS

Malaysiamoderatedthesession.

Datuk Hj Mohd Amin Nordin Abd Aziz

provided an overview of the lowcost housing

providedby theDBKLover thedecades, and the

managementandmaintenanceofthese.TheDBKL

hasmanagedover70,000unitsofpublichousing

and longhouses thatwerebuilt foreither rental

or sale. The number of vacant Public Housing

Project

(PPR)

units

stood

at

4,523.

The

DBKL

allocated RM133

million for the

management and

maintenance of

housing in the year

2012. Open re

gistration stood at

34,478 eligible

applicants for low

cost units as at 1

July 2012. Rental

collection reached

70 to80per cent a

year.

DBKLhasan

ehousing points

system which

determines an

applicantseligibility

for DBKLs public

housingrentalschemes.Thedataisreviewedbya

Committee.Therenttopurchaseoption isnot a

viableoneforpublichousingbecauserentalsbring

inless

money

than

is

needed

for

maintenance.

Moreover, many applicants have had their loan

applications from banking and other institutions

rejected.Therefore,thegovernmentintroduceda

Perumahan Wilayah scheme, through which the

EPF lends to Yayasan Wilayah Persekutuan at a

five per cent interest rate, and the latter then

lendstohomebuyersatsixpercent.

Dato Fateh Iskandar Tan Sri Dato

Mohamed Mansor stressed REHDAs role in

developingamillion

units

of

low

cost

homes

and

4.5 million of medium cost ones, thereby

exceeding their targets. Property developers are

boundby several regulations forexample, the

20:20:10quotaof lowcost,lowmediumcostand

mediumcosthousesindevelopmentsoftenacres

and above in Selangor, a ceiling selling price for

low cost houses varying between RM42,000 for

developments within Majlis Perbandaran and

RM30,000 for developments outside of Majlis

Daerah,and a contributioninlieuof30per cent

andanominal

amount

of

RM3,250

to

be

paid

into

ISISRoundtable


(From left) Kamarul Rashdan Salleh, MohdAminNordinAbdAziz, StevenWong andFatehIskandarMohamedMansor


13/20



aDBKLmanagedfundforevery lowcostunitnot

builtintheFederalTerritory.

Developers lose money in building low

cost

houses

because

the

cost

of

building

a

low

cost unit, excluding land cost, averages at over

RM69,000 forahighriseunit intheKlangValley

and aroundRM40,000 for a singlestorey terrace

house in other towns, leading to a loss for the

developerof aroundRM15,000 toRM28,000per

unit.Manyoftheseunitshavenotbeentakenup

for various reasons including poor location, and

quality and maintenance issues. In addition,

developers are unhappy about other rules and

regulationswhichaddtocostsanddelays,suchas

theincreaseby40percentincompliancecostfor

housing completion, deemed unfair since

contributions are already being given to bodies

suchastheWorksDepartment(JKR),IndahWater

Konsortium(IWK)andSYABAS.

The inconsistent policies between states

such as different Bumiputera quotas, the

mandatorybuildthensell regulationproposed to

beinstitutedby2015,landscarcity,increasedland

costs, high compliance cost outpacing income

growth, and the regulation and distribution

system of lowcost housing, all contribute to the

affordability gap between house price and

income.

DatoFateh Iskandar stressed that itwas

time for the private sector to stop building low

cost and to practice contribution in lieu of

building.Thegovernmenthesaidshouldfocusonproviding, regulating and distributing low cost

housing (citing the example of PPRs), and not

competewith privatedevelopers.He alsourged,

amongotherthings,amoreproactiverolebythe

government in acquiring suitable urban land and

providing

amenities

and

infrastructure

for

conducive living environments, reduction in the

costsofdoingbusiness throughbusinessfriendly

policies, alignment between states of policieson

lowcostandaffordablehousing,andarevisionof

guidelines that currently impede the increase in

the supply of affordable houses, such as size,

densityandplotratiorequirements.

Dato Dr Kamarul Rashdan Salleh

highlighted SPNBs contribution in completing

almost20,000

units

of

low

and

low

medium

cost

houses.Heunderlined several issuesandoffered

correspondingsuggestions.

1. Increased interest rates and tighter

lending guidelines have reduced

buyers ability to secure mortgages.

Buyers should be better protected

from the risks of interest rate

fluctuationsasmostSPNBbuyersopt

forvariableloanrates.

2.

Loancommitments

have

become

very

challenging.Newbuyersarestruggling

tosavetopayfordeposits.Ontopof

depositsandmortgages,anadditional

amount of around RM26,000 is

requiredinthefirstyearofpurchase.

3. Some financial institutions are not

willing to lend despite buyers

possessinggoodcredithistory.This is

a chance for a hybrid approach

through an affordable mortgage and

rentalrate

in

the

form

of

ashared

equityscheme.

4. Existingsupplysideandtaxincentives

forconstructionofaffordablehousing

are insufficient. Therefore, incentives

such as taxpayable credit streams

which could be used to capitalize

benefitscouldbegiven todevelopers

whobuildaffordablehomesover the

longterm.

Increasedinterestratesand

tighterlending

guidelines

have

reducedbuyersabilitytosecure

mortgages


14/20


5. Brownfieldorindustriallandshouldbe

redeveloped to offset the trend of

speculativeland

investors

buying

plots

for future gain. Furthermore, the

governmentshouldmovetowardsplot

ratio regulation and away from

density.

6. Variable CF requirements, especially

on infrastructure, and improper

planning, such as insufficient public

transportation and poor amenities,

mustbeavoided.

DatoDr

Kamarul

supported

public

private

partnerships inprovidingaffordablehomesanda

hybrid framework for cooperation. The

responsibility for delivering lowcost houses

restedupongovernment institutionsormunicipal

councils. The private sector can then focus on

affordable housing. He also proposed a

combination of incentives, subsidies and

contributions by beneficiaries, where the latter

could contribute 20 per cent to 40 per cent of

monthlyincome.

Furthermore a zoning strategy for

affordable housing in the city centre could be

developed by making available public land or by

attaching mandates to planning permits for new

developments there. Finally, the government

should be more flexible in terms of the size of

houses, and the structureofownership,whether

they are in the form of rentals, renttobuy, or

sharedequityoptions.

Dato

Mutalib

Alias,

in

the

final

presentation,gaveabriefoverviewontheroleof

PR1MA.PR1MAstargetgroupisthemiddle50per

centofhouseholdsearningbetweenRM2,500and

RM7,500permonth, thatqualify forneither low

cost nor highend housing. Both the government

as well as private developers play a role in

ensuring the housing needs of middleincome

earnersarenotneglected.Thereare850,000non

homeownersandahousingsupplyof30,000units

perannum.

PR1MAis

expected

to

be

able

to

suppress

its costs by leveraging on facilitation by

government in land acquisition, funding support

for main infrastructure, and approvals for all the

necessary services for completion. Italsoexpects

the government to absorb land costs and, if

necessary, the main infrastructure costs,

comprising 15 to 20 per cent of the total

development cost. In addition, it is looking at

various delivery models and buyers financing

options.Inrealizingthatthegovernmentlacksthe

capacityto

close

this

gap

on

its

own,

PR1MA

plans

to partner with private developers. Such

arrangements are necessary for projects on

private,developerownedland.

PR1MAaims tobebothaquasiregulator

and a developer of affordable, quality homes.

Among the regulatory features of PR1MA is the

imposition of a tenyear moratorium on the

secondarymarket,duringwhichperiodthosewho

wish to sell their units have to sell to the next

personon

the

waiting

list,

through

PR1MA,

at

cost

price, adjusted to inflation and administrative

costs.Compulsoryacquisitionwithcompensation,

institutedinthePR1MAAct,wouldbeenforcedin

theeventofaviolationofitstermsandconditions.

Takeawaysfromthesession1. Private developers would prefer to be

ISISRoundtable

Theresponsibilityfordelivering

lowcost

houses

or

maintaining

theurbanpoor areasrestedupon

governmentinstitutionsor

municipalcouncils


15/20


relieved of the responsibility of building

lowcost houses due to burdensome

regulationsandthelossesincurreddueto

these.

2. Theroleofthegovernmentisnot limited

to regulating the property market.

Government is increasingly expected to

meet the housing needs of the poorer

segmentofsociety.

3. The authorities should explore new

optionsrelatingtothesizeofhousesand

the ownership structure in the provision

ofhousing.

4. Government intervention in providing

land isseenascrucialatatimewhenthe

high

and

accelerating

cost

of

land

is

drivingpropertypricesupwards.

5. The transport infrastructure is a very

important factor thatmustbe integrated

intohousingpolicies.



AlightmomentattheRoundtable


16/20

Session4:PanelDiscussionon Issues,

ChallengesandResolutions

Thissessionsoughttosummarizethemain issues

thatwereraisedintheprecedingsessions.

Firstly, price ranges for lowcost housing

and affordable housing must be more precisely

definedandupdatedtobetterreflecttherealities

of theday.Secondly,on theprocessofproviding

forbothlowcostorsocialhousing,andaffordable

housing for the middleincome group, should

theseprocessesbemergedorseparatedinlightof

differing customer bases and needs? Finally, we

shouldpayattentiontothesupplyanddemandofpublic and affordable housing and their

intermediaries.

On the supply side, should the

governmentbethesoleproviderofsocialhousing,

with some private funding? Should the private

sector build public and affordable housing while

the government merely regulates the industry?

Whatistheroleoftheprivatesectorassupplier?

On the demand side, who should determine the

demandfor

public

and

affordable

housing?

Should

it be done by the Ministry, PR1MA, NAPIC, the

private sector or another body? In addition to a

shorttermdemandprojection,theremustalsobe

longterm demand projection for housing in

Malaysia.Thereisalsotheneedtodistinguishreal

demand from speculation. Furthermore,

intermediaries in the forms of financing,

incentives, regulators, public transportation and

landareimportantconsiderations.

Thefollowing

issues

were

discussed:

1. Poorplanningandimbalancedsupply

Demand for lowcost houses remains

significant as a large section of the

population are still lowincome earners.

500,000 people nationwide, including

89,000 squattersare still looking for low

costhouses.However,poorplanninghas

resulted in some areas having an

oversupply of lowcost houses while

othersremainundersupplied.

2. Anewfundingmechanismspecifictothe

lowincome

group

Anewmechanism isneeded ifownership

instead of rental is to be encouraged.

Current mechanisms have sidelined the

poorwhilehousepriceshaverisenbeyond

their reach. There should be a separate

policy for the low income group, as

housing for the poor should be the

governments responsibility. One

participantevensuggestedfreehousing.

3.Rental

as

an

alternative

to

ownership

Severalparticipantssupported the rental

systemeitherafullorpartrentalas

an alternative to ownership. However, a

major hurdle is that of arrears owed in

rentalsandmaintenance fees. Itwasalso

themaincauseforthefailureoftherent

tobuy schemes. Despite the challenge,

therentalmodelcontinuestoberelevant

and important inpublichousingschemes.

Enforcement mechanisms could play a

role,

such

as

at

PPR

Hicom,

where

effective enforcement mechanisms had

resultedingoodrentalcollection.

4. Revising the ceiling price of lowcost

houses

The government has recognized that

RM42,000 was insufficient to cover the

increased land and construction costs.

Rising landcostwasparticularlycritical in

ISISRoundtable


Thereshouldbeaseparatepolicy

for

the

low

income

group,

as

housingforthepoorshouldbe

thegovernmentsresponsibility


17/20

theKlangValley.For instance,aPPRunit

costsalmostRM100,000.

5.Mitigate

excessive

escalation

in

house

prices

Variousinstrumentscould,andshould,be

put in place to mitigate excessive

escalation in house prices. One option is

for developers to contribute to the

municipal council for the construction of

affordablepublic housinginthatarea.

6. Clearly defined prices of lowmedium

costandmediumcosthouses

Whileprice

of

low

cost

houses

are

set

at

RM42,000, prices of lowmedium and

medium cost houses are determined by

state authorities. The federal authorities

merely provide a rough guideline by

specifying that thesehouses shouldbe in

the price range of RM42,000 to

RM100,000.

7. Stringentregulations

Variable and overly stringent regulations

acrossstates

could

be

adeterrent

for

privateprovisionofaffordablehousing.In

Selangor, ceiling prices differ across

locations, while developers who wish to

change from lowcost housing to

affordablehousing

are

bound

by

aceiling

of RM100,000. The need to cross

subsidize lowcost houses has hampered

developers willingness to increase the

supply of affordable housing. For

example, the required selling price of a

housewithamarketpriceofRM220,000

is RM89,000. The requirement for two

parking spaces per unit of affordable

housing has also limited the number of

unitsbeingbuilt.

8. Multiagencyapproach

A major question to ask would be

whether all the authorities related to

affordable housing should be merged or

should they remain separate. Clearly

defined, separate or shared respon

sibilities amongst the three tiers of

authority in providing social housing is

crucial. WhileDBKL hasbeen successful

in providing social housing, other local

governments

might

not

possess

thenecessarycapabilitiestodoso.

ISISPublications


SyedAlidiscussingapoint


18/20

16 ISIS FOCUS NO. 3/2013

ISISPublications

Towards a Green Economy: In Search of Sustainable

Energy Policies for the Future

Edited by Adnan A Hezri and Wilhelm Hofmeister

Published in Singapore by Konrad Adenauer Stiftung

and ISIS Malaysia

175 pages (2012) RM 40.00

ISBN 978-981-07-1799-5

[Available from ISIS Malaysia]

In thirteen chapters, this book documents the vagaries of problem framing and policy responses by nine

countries, all of which are guided by recurrent themes of energy transition, policy choices and green

economy. The books analytical scope goes well beyond the commonly addressed structural issue in

energy policy to encompass innovation in processes, institutions and new policy instruments for

sustainable energy systems.


19/20

ISISFOCUS NO.6/2012 10ISISFOCUS NO.9/2011 9

NOTES


20/20

INSTITUTEOFSTRATEGICANDINTERNATIONALSTUDIES(ISIS)MALAYSIANo.1,PersiaranSultanSalahuddinPOBox12424,50778KualaLumpurMalaysia

Tel

:

+603

2693

9366

Fax:+60326915435Email:[email protected]:www.isis.org.my

ISIS Focus No.3 Mar 2013

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